Goodwill is to be valued at three year’s purchase

1 :-  Goodwill is to be valued at three years’ purchase of four years’ average profit. Profits of the firm for the last four years ending 31st March were:
2022 – Rs 12,000, 2023 – Rs 18,000; 2024 – Rs 16,000; 2025  – Rs  14,000.
Calculate the amount of goodwill.

Solution:- Average profit method
Average profit of four years = 12,000 + 18,000 + 16,000 + 14,000/4
                                             = 60,000/4
                                            = Rs 15,000

Goodwill = Average profit x No. of years purchased
                 = 15,000 x 3
                 = Rs 45,000